Stock Strategist

Tesla Makes Progress but Has a Long Road Ahead

David Whiston, CFA, CPA, CFE

 Tesla (TSLA) reported a first-quarter adjusted loss of $3.35 per share, beating consensus of a $3.48 loss. Total company revenue increased 26.4% year over year (up 3.7% sequentially) to $3.4 billion, beating consensus of $3.2 billion. We are leaving our fair value estimate in place but will continue to monitor Model 3 deliveries and adjust our vehicle delivery projections, which can affect our valuation. We think the long-term story on what Tesla can achieve in electric cars, trucks, mobility, and energy generation and storage will ultimately determine the value of the company. We believe the stock trades on option value that, if realized, is still many years away, and therefore we do not think any single quarter’s results are critical to the investment thesis.

Vehicle deliveries increased year over year by 19.7% to 29,997, with the Model 3 sedan constituting 8,182 of the total. Management continues to expect a Model 3 weekly production rate of 5,000 in about two months’ time. Tesla Energy’s revenue nearly doubled year over year to $410 million, with storage revenue growth of 161% more than offsetting a 50% decline in energy generation megawatts to 76 MW. Also encouraging is cash sales’ continued increase as a percentage of total residential solar deployments (66% in first quarter versus 54% in fourth quarter and 31% in the first quarter of 2017), which helps cash flow compared with the old leasing format under SolarCity.

David Whiston, CFA, CPA, CFE does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.